The Child Porn Pipeline
Part Two: Making a million a month from the suffering of children
'As soon as one site goes down, they move the site to another computer in a another country' - Federal agent Dan Daufenbach
Dressed in khaki pants and a summery silk, button-down shirt, Yahor Zalatarou entered the Paris hotel accompanied by a burly business partner who handled his company’s security. Another man served as his interpreter.
At 25, Zalatarou looked every bit the successful businessman he was — the head of a multimillion-dollar Internet company in Minsk, Belarus, in Eastern Europe. The Paris meeting with an American associate would, he hoped, clear up a banking glitch and allow Zalatarou to expand his business.
The meeting went well. It lasted less than an hour, ending with plans to resume talks the next day. But just as the American stepped away, a team of French police pinned Zalatarou and his companions to the floor and handcuffed them.
Zalatarou was one of the world’s biggest commercial child pornographers, producing, selling and transmitting child pornography for people around the globe.
And his laptop computer that police seized provided a treasure trove of information for U.S. law enforcement.
“It was disturbing how blatant it was,” said Carlos Ortiz, who helped prosecute Zalatarou. “It was like they were selling cars on the Internet.”
Regpay, the Internet pornography company Zalatarou headed, is now shut down, but the fallout from his arrest four years ago continues.
Zalatarou’s rapid rise and high-flying lifestyle are over. He and two of his business partners — believed to be fronts for the Russian mob — were extradited to the United States where they pleaded guilty to peddling child pornography and were sentenced to federal prison.
Meanwhile, about 1,200 men have been arrested worldwide — including some 600 in the United States and 16 so far in Western New York — for purchasing the images Regpay sold.
Those numbers only scratch the surface. In Regpay records, investigators discovered the names of some 90,000 users — between one-third and one-half of them Americans — who downloaded images of child sex abuse from sites the company owned or managed.
So the arrests continue in a four-year-old case that offered the first up-close examination into one of the most lucrative money trails of child pornography.
A chunk of the upwards of $7 million Regpay took in during the 18 months it operated ended up in the United States.
At least three businesses that shepherded subscription fees from credit card companies to Regpay shared at least $432,000 — possibly closer to $1 million — over a 12-month period, according to court records and Buffalo News calculations.
A smaller chunk went to five American computer server companies that hosted Regpay’s many Web pages and business records. It’s unknown how much these companies earned in total, but federal court records indicate it was in the tens of thousands.
The companies involved, when contacted by The Buffalo News, all said they did not know Regpay was in the child pornography business.
Flourishing business The run-down commercial district of Minsk where Regpay was located is in one of the poorest sections of the city, and the brown brick Regpay building looks more like an old military barracks than a 21st century dot-com business.
But inside, the Regpay office was a hive of activity. More than a dozen employees used computers to reach a steady stream of customers worldwide.
A complaint department fielded e-mails from customers, some grousing that children in the photographs were too old, or that the sexual images weren’t “hard-core” enough.
A billing department handled problems from customers. An advertising department sold space on Regpay Web sites — sometimes to competing Internet pornographers.
Down the hall was a studio, complete with special lighting, digital cameras and backdrops, used to photograph children whose pictures, officials believe, were uploaded to Regpay computers and then to Web servers that Regpay rented, including several in the United States.
“There were computers everywhere,” one U.S. official said of the Regpay office.
Zalatarou, the company president, was Regpay’s computer guru. Using his computer skills, Zalatarou developed a password-protected third-party billing system that put distance between Regpay and its Web sites.
Regpay, using Zalatarou’s system, was managing more than 400 Web sites, almost all featuring child pornography.
Most of the sites were owned by other people, who hired Regpay to sell the pornography for them. Regpay also operated at least five child pornography sites of its own.
Sometimes Regpay took its own pictures. Other times, company workers would data mine — taking pornographic images of youngsters already on the Internet, repackaging the photos as their own, then posting them for sale on Regpay sites.
There were lots of sales — upwards of 350,000 transactions from December 2001 to July 2003 — with each costing as much as $70 per subscription.
Investigation begins
For law enforcement, the road to Regpay began in Newark, N.J., during 2003, when members of a small federal task force — representing the Postal Service, Internal Revenue Service and Immigration and Customs Enforcement — expressed concern over an increase in child pornography on the Internet. They decided to see who was behind it.
Without any specific target, task force members Googled words like “Lolita” and “preteen.” “There were hundreds of sites accepting credit cards,” said Ortiz, a former prosecutor. “It was the blatant commercialization of child pornography.”
As they delved further, task force members identified common threads among the images. Many carried “.ru” tags, indicating the pictures originated in Russia and other Eastern European countries. Also, the billing for many of the sites was routed through a credit card processing company in Florida.
After sifting through a string of aliases, phony e-mail accounts and fake mailing addresses from Afghanistan to Africa, investigators followed a money trail that led them to Arthur P. Levinson in Fort Lauderdale.
Levinson owned Connections USA, which hired different companies to handle the credit card transactions. The money trail continued, ending in Eastern Europe, at Regpay.
Regpay processed as much as $7 million in sales over its 18-month lifetime, and took in $1 million a month in its final months of operation, investigators found.
In one 10-month period, Connections processed more than $3.6 million for Regpay, with help from companies Levinson hired in Colorado and Rhode Island. The three U.S. companies got a total of 12 percent of credit card transactions they handled, according to court papers.
That left 88 percent for Regpay.
Investigators in June 2003 found $1.3 million in Levinson’s Morgan Stanley account ready to be transferred to Regpay. They froze the money and confronted Levinson, who began cooperating.
Setting up contact
An agent, pretending to be Levinson, contacted Zalatarou and suggested a meeting to iron out problems holding up payments.
Zalatarou took the bait.
“I really believe a meeting is necessary because there’re a lot of other business opportunities above and beyond what we are doing now,” Zalatarou e-mailed back.
Zalatarou and his colleagues met their American business associate about 1:30 p.m. July 30, 2003, in the lobby bar at the Hotel Concorde La Fayette in Paris.
The meeting continued the ruse.
The agent posing as Levinson told Zalatarou that because business was so robust, one of the processing companies was holding large amounts of Regpay cash in escrow. Also, he told Zalatarou, the IRS was suspicious over the large amounts of money leaving the United States.
Zalatarou offered a solution. Regpay would open a bank account of its own in the United States. With that problem ostensibly solved, the meeting ended for the day. That’s when the agent left the bar, and French authorities entered to arrest Zalatarou and the translator, Alexei Buchnev. A third man, Aliaksandr Boika, Regpay’s technical administrator, was arrested in Spain a few days later.
Zalatarou and Boika were taken to the United States, and in a New Jersey federal court, they pleaded guilty and were sentenced in 2006 for money laundering and conspiring to distribute and advertise child pornography. Both are serving 25-year prison terms.
Buchnev pleaded guilty to child pornography. He was sentenced to three years.
Before his sentencing, Zalatarou told authorities he was the public face of Regpay but that the company was actually run by organized crime and government officials in Belarus.
Zalatarou later told the federal judge he “tried to get out of the business, but his bosses would not let him.
“When I was arrested, the owners of Regpay contacted me and they warned me one more time that I should never make public their names, and the names of the people who are behind them,” he said. “And they told me if I don’t comply, my life and the life of my wife and my child would be under threat.” Zalatarou told authorities he wasn’t sure of the owners’ names.
Authorities worldwide believe much — but not all — of commercial child pornography is backed by criminal organizations.
“Organized crime is finding more money in child exploitation than in drugs,” said Claude Davenport, an agent with the U.S. Immigration and Customs Enforcement.
It’s estimated there are some 1,700 commercial child pornography sites — containing thousands of Web pages — operating worldwide. It’s likely though, that less than 300 businesses operate all the sites, authorities said.
“Some of the guys who run these sites have multiple locations because the government keeps shutting them down,” said Don Daufenbach, a federal agent who works with Davenport. “As soon as one site goes down, they move the site to another computer in another country. They’re like cockroaches scurrying around the floor when the lights come on.”
In Zalatarou’s case, federal agents agree the Russian mob as well as corrupt government officials in Belarus received most of the Regpay profits.
Zalatarou’s attorney agreed.
“The reason I think there are people above him is the bank accounts were in his name, but he doesn’t seem to end up with a whole lot of money,” said Zalatarou’s attorney, Robert Little.
“He was indigent. My appointment to represent him was made by the court.”
e-mail: lmichel@buffnews.com and sschulman@buffnews.com
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